1.- It was cancelled.
2.- It was shown way too early.
3.- It's been turned into a 3D platformer instead of a 2.5D plat.
4.- It's been turned into Kirby's Epic Yarn 2.
5.- It's been turned into a normal Yoshi 2.5D platformer (in other word, no yarn art style)
6.- It's been turned into a normal Yoshi 3D platformer.

It's probably still coming, but was announced way too early to give the illusion that the Wii-U has a bunch of games on the way, much like "X" and "SMT vs FE" were announced years before they will see the light of day.

7.- We thought it hadn't been shown because it was completely changed and revamped to become another entry in the Yoshi's Island series. Development then moved to Nintendo's handheld.

OR

8.- The game hasn't been changed at all and it is still the Yarn Yoshi game we were shown during its announcement and the game is simply not far enough in development to be shown to the public once again.

Just a couple more choices because these are my opinions. (I'm just kidding on 7. but I truly believe the answer is 8.)

I've gotta go with 2. It was just shown way too early. Besides, as skywake suggested, even if it were almost done, Nintendo wouldn't wanna hype it up and risk hurting Yoshi's New Island sales. I'm waiting for April's ND before we get any word on it, personally. But you also have to keep in mind, this game was hardly in development, back in January, from the looks of it. I'm sure by now, there's /something/ to show, but it's certainly not likely anywhere near complete. (For reference, the original F-Zero on the SNES was rushed to be available at launch and still took something like 15 months to complete. If we assume January 2014 was their 15th month, which is a silly assumption to make, but one I'll make for the sake of argument, there's a good chance we'll see it around the beginning of Fall, much like Pikmin 3 or Wonderful 101, last year. And what better timing? Kick off this year's Wii U season with something cutesy and fun.